The objective of the present work is preparation and physicochemical characterization of nateglinide (NT)-cyclodextrin (CD) inclusion complex both in solution state and solid state and to enhance the dissolution properties of nateglinide via complexation with β-cyclodextrin (βCD). Inclusion complexes are prepared by kneading and micro wave irradiation methods. The prepared inclusion complexes were investigated in solution state by phase solubility studies and solid state by DSC, FTIR, powder XRD and in vitro dissolution studies. Phase solubility studies revealed 1:1M stoichiometric inclusion complexes. A true inclusion complex of Nateglinide with β-Cyclodextrin at 1:1 and 1:2M in solid state was confirmed by Differential Scanning Calorimetry, and powder XRD. In vitro dissolution data suggests the improvement of dissolution of Nateglinide-β-Cyclodextrin inclusion complexes were superior when compared to pure. Overall microwave irradiation method showed superior dissolution properties when compared to kneaded systems and physical mixtures. Thus, from the research work it was concluded that aqueous solubility and dissolution rate of NAT can be improved by complexation with cyclodextrin.